Executive Briefing
Actually, Birkenstock’s IPO was fine
Don’t worry about this week. The IPO ‘pop’ remains dumb.
By Dan Frommer on Saturday, October 14, 2023 at 8:00 am
Birkenstock, the German shoe company loved for its sandals and clogs, went public this week.
Reading the headlines the last few days — “Birkenstock stubs its toe,” “Birkenstock’s lackluster IPO,” “Underwhelming public debut,” — you might think something went seriously wrong here. I disagree!
This is a good example of how covering financial markets like they’re sporting events is really a disservice.
What actually happened: Birkenstock issued stock in its public offering at $46 per share, around the midpoint of the $44 to $49 per share range it was considering.
This allowed the company to raise hundreds of millions of dollars of cash to pad its balance sheet. (Birkenstock is profitable and growing.) Its owner, the private equity firm L Catterton, also sold some of its shares, maintaining a large majority stake and booking some profit.
Once those shares started trading on the public market, they did so at $41, around 11% below their offering price.
That’s when the negative-narrative headlines started — and have continued. Friday, the stock — now with this cloudy narrative attached to it — closed at $36.38. All in, it’s down around 21% from the offering price, and around 12% from where it first started trading.
What gets positive headlines on IPO days is a big “pop” — when the share price soars the minute it hits the market, and sometimes keeps going. It makes for a fun-looking chart, and we’re conditioned to think that “up and to the right” is the best thing. For an IPO, it’s generally not.
Why not? Here’s a six-minute video from Henry Blodget, the CEO of Business Insider, former Wall Street stock analyst, and my former boss, explaining why the IPO pop is actually bad.
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